Years After the Market Collapse, Sidelined Borrowers Return

The return of many of those who experienced foreclosures or short sales in the economic downturn could influence the housing market.

Comments: 123

  1. Pushed to borrow up to 2007. Many houses foreclosed upon. Banks technically bankrupt. So Fed gives free money to "investors" : companies who can borrow ((unlike mom and pop or Ben B) and now over 50 percent of new houses are bought by REITS, funds,investors, dodgy hedgy funny funds, whatever , and the net effect is a wholesale transfer of capital from the middle.working poor to the speculator class.

    What would I have done if I were in charge. I would have nationalized the bankkrupt banks. Foreclosed upon those who should never have been loaned to. Then have the government buy all those foreclosed houses for pennies on the dime, built some more infrastructure around them then sold them back to the folks for a small profit. That would have been FISCAL stimulus. Old school Chinese style,

  2. Buying another home after going through foreclosure seems like the triumph of hope over experience. I wonder if the generation who saw their parents thrown out into the street, their finances destroyed and often their marriage broken will embrace home ownership as part of the American Dream. And with their hands full carrying often lifelong student debts, they are reluctant to add another burden.

  3. More evidence that the Fed has created another bubble.

  4. Clearly the market is topping out again if the insolvent are jumping back in. I have run the numbers and renting is cheaper where I live even without the big run ups I have seen elsewhere. I have friends who have been on this merry go round for many years and have no savings. Every time something inevitably goes wrong they have to sell or short sell their home. They have drunk the homeownership coolaid. Homeownership is for disciplined savers and is a place to live, not a savings vehicle. Like cars the constantly require more money for upkeep. Owning is more of a lifestyle choice than an investment. Only those who pay off their mortgages do well long-term.

  5. I mostly agree but if there is another housing "boom" then everything you say changes. The problem is that no one can predict the boom and bust cycle.

  6. I think maybe only a New Yorker, San Franciscan, or Seattlite would talk of "another boom." And maybe Charlotte, and some places in Texas.

    But the climate is changing, and that is going to be kicking in more and more in the next 30 years.

  7. But I know people who have made out like bandits.

    I have friends in Boston. They bought a house in the 90s for $200K. It appreciated to $550K when they sold it in 2013. They made a $350K profit!!! They then took that money, and bought a retirement home in a less expensive area -- and paid CASH for that house, with plenty left over to spare.

    I live in the Rustbelt. In that same time frame, MY home lost over 70% of its value -- it is basically unsellable at any price, because NO HOME on my street has sold for the last 4 years.

    That's how uneven and unpredictable it is -- some people are astronomical winners, as if they won the lottery -- others get nothing or are economically destroyed.

  8. Maybe it's just me, and the article doesn't speak to family size, but "starting again" by buying a five-bedroom home seems to be exactly the same sort of thing that got many people in trouble the last time around - buying more house than needed or can be afforded in the long term.

    I've known any number of childless couples who have bought far more home than they need, even to the extent that some rooms don't even get furnished completely or at all. Aside from the financial burden of mortgage, insurance and property taxes associated with buying too big, it is a waste of resources and energy.

    People need to come to their senses and stop thinking that everyone needs or should live in these oversized homes (which have up-sized considerably in the past few decades). We also need to stop telling people that a home is an "investment", which is also a problem fostered by the tax code in this country. My recollection from previous discussions on this is that most other leading nations do not offer the deduction incentives we do in the US for home mortgages.

  9. Completely agree. They bailed in 2009, and now they have a new mortgage on a $300,00 home? Absurd.

  10. Who is going to buy all these five BR homes when the boomers downsize? Childless singles and couples living beyond their means? Coops of the single and underemployed?

  11. I can't get my head around wanting that much space. We are a childfree couple and are fine in a one-bedroom apartment.

  12. Do Tammy and Mike really NEED a 5 bedroom home? Look at the furnishings in their home. And they filed for bankruptcy? Give me a break. People WANT and when they realize they can't afford, they go belly up and make it hard for the rest of us who can afford, and do pay, to be able to get credit. I hope they're happy in their mini-Mcmansion of 5 bedrooms and this time learn to live within their means.

  13. This is a bit unfair. Of course, nobody "NEEDS" a five-bedroom house, but this is completely beside the point. If they have been able to demonstrate their ability to pay to a lender, they can buy whatever they like -- and it may have much better resale value than a smaller house. They may eventually have more children, and use a bedroom as a home office or sewing room -- it is not for me to say.
    They made a bad bet, but not a crazy irresponsible one, from the limited information available in the article.

  14. The target for the next round of looting and collapse is not these 'wealthless' retread real estate couples, but the reasonably well-heeled ETF suckers who are unaware that their paper equity is the next target for collapse-shock looting by those few at the controls of this fixed casino.

  15. Once burned and not even twice shy
    In the oven they go with the Pie,
    They steer without rudder
    It does make one shudder
    I guess logic doesn't apply.

  16. How many times can a person file for bankruptcy? Seems to me to be the easy way out. I will lose my home because I got sick and then I got fired after I got sick, because I was sick. And of course, the EEOC is truly effective.

  17. Wow. Everyone should read the link you provide.

    Most Americans are not aware.

  18. Unless they file for bankruptcy. which is what many short sellers do. Especially those in recourse states. My next door neighbor fell into foreclosure...just before the bank kicked them out they declared bankruptcy...they lived rent free for 3+ years while the wheels churned and then abandoned the property. the pipes froze/burst and the house is now full of mold and destroyed. The bank dumped it and now it is back on the market.....who wants to bet there is still plenty of mold behind those walls for the new home owners to get ill and fail on their mortgage.

  19. The taxes due for charge-offs were waived for a few years, but they are back en force.

    For as much as NYTimes commentators bemoan the greed of Wall Street, they should try owing the IRS money. A bank has to sue and win a lawsuit in order to garnish my wages, but the IRS can do this without any sort of outside oversight.

  20. Stiff your creditors multiple times but still wallow amid your home theater system, leather furniture, ornate dining room, pets (not cheap) etc. in your five-bedroom McMansion.

    I'd be ashamed to look in the mirror in the morning. Yeah, the financial industry bears a giant share of the blame for the collapse but the unadulterated greed, self-delusion and imprudence of people like these fanned the flames to a great extent. They are not victims.

  21. Your creditors would stiff you without blinking. Defaulting and bankruptcy are just cut-and-dried business decisions to them, completely unhampered by any moral or ethic considerations, as are repossession and eviction. They wouldn't cut you one inch of slack unless it suited them to do so.

    As long as we stay within the law - which is more than they do - I think individuals should do what is in our own best interests. Why not be as ruthless dealing with corporations as they are with us? Otherwise, we are saps. They probably laugh at people who feel morally obligated to pay debts if they don't have to.

  22. Denise,
    I agree that big banks, hedge funds and even the Fed have been robbing us middle-classers blind the past few years via what the financial institutions are reaping on zero-interest-rate policy and the meagre slap on the wrist that bad banking policies have received from regulators.

    Be that as it my, I do prize my good word and frankly I'm smart enough not to get myself into a financial bind in the first place. Unlike many others, apparently. If I wanted out of a contract I would find an honorable way to do it, not the scurvy route of foreclosure and bankruptcy.

  23. boomerang buyers? They never learn. Life will always provide new drama for your mortgage payments. Also, these boomerang buyers get extra high interest rates as part of their return, some as high as 12%.

  24. "But now, four years since foreclosures and short sales peaked in the Great Recession."

    bullhooey.

    Regions vary, but Northern NJ is still struggling with lots of foreclosures. The "Great Recession" is still very apparent in Sussex County NJ and people are struggling.

    The foreclosure trend is from over and I frown every time an article says otherwise. It is not the whole story across the USA.

  25. Plus, the baby boomers will soon need to shed the big homes, and there is a question whether the next in line is open to the monstrosities in the suburbs.

  26. The recovery is very spotty -- but remember, some areas were not affected at all, and some others just took minor hits. I have friends who live in areas where the prices simply stopped increasing dramatically from 2008-2013 -- they never LOST value, they just didn't see yearly 10% increases for a while.

    But other areas are still hard hit. I live in the Rustbelt Midwest, in an inner ring suburb. No house on my street has sold (except as a foreclosure) in 4 years. I have neighbors whose homes have been for sale for 2-3 years, without even a nibble. I have other neighbors who tried to sell, for years, and then walked away in disgust....sometimes from a home they had owned for 20 years or more.

    I know others who have "played the system" to get rid of home that is worth 70% less than they paid -- got 3 years of living FREE -- pocketed the cash -- and now can buy in a much better neighborhood.... leaving US to deal with their abandoned home, foot long grass, rats, trash, vagrants stealing the copper plumbing, etc.

    A LOT of people have now learned that they can walk away from their obligations, or from a "bad deal" (i.e., a home that lost value) and NOTHING WILL HAPPEN TO THEM....they can just buy something else.

    @outis: that won't ever happen. My 29 year old niece just sold her modest condo and bought a HUGE McMansion. She and her husband are childless, but felt they "needed" a five bedroom, 2500 square foot home with 3 bathrooms on 5 acres.

  27. The lowered down payment requirements for high risk borrowers will encourage them to buy homes they can't afford, leading to another round of foreclosures. Borrowers who can make higher down payments are less likely to become delinquent on a mortgage. They have more to lose from a default and therefore will be more responsible to select an affordable home.

  28. "Through the end of last year, ONLY A TINY SLIVER of borrowers tarnished by foreclosures and short sales during the economic downturn had bought homes again"

    When you actually read the article you realize that the headline is a bit overstated to say the least.

  29. I guess Tammy and Mike are very very sure that they will have job security in Atlanta for thirty years, as they just signed their lives away again for an oversized home there. Oh, wait, that doesn't matter, does it now? They have learned, just as the bankers learned, that there is no real penalty for making a bad decision with other people's money.

    Maybe in a few years you should go back and check up on them to see if they took out a loan on the first house to build an even bigger house down the street. Lord knows the two of them really need the room.

    What a country we live in.

  30. Actually, there is a time limit on this.

    Think of bankruptcy protection as a way to reorganize, and quit being so judgmental. It's a business decision.

  31. It is obvious they have learned nothing, because they are doing THE SAME THING -- buying a huge McMansion.

    I am sure if that home pictured costs $300,000 then there are MANY homes in their area that are modest-size, decent colonials or bungalows that cost $150,000 or less.

    They are proof positive that NOBODY HAS LEARNED ANYTHING from the financial crisis, foreclosure crisis, housing crisis. If anything, everyone (realtors, buyers, even journalists) are chomping at the bit for "good times" to come back -- huge yearly inflationary increases in housing, the ability to make a "killing" off your home, etc.

    Tammy and Mike are probably eyeing some lot down the street, even as we speak. Interest rates are still low! They could buy or build another McMansion, and wait for prices to go from $300K to $500K and then cash in and be rich.....really, there's NO WAY that could possibly go wrong...is there?

  32. Let's just remember the great recession never would have happened if mortgage borrowers upheld their obligation to pay.

  33. Let's just remember the great recession never would have happened if reckless and fraudulent Wall Street speculators had not ruined the USA Economy.

  34. "Let's just remember the great recession never would have happened if mortgage borrowers upheld their obligation to pay."

    You have much to learn about the world's financial system. A thousand bankers chuckle at your statement as they light their cigars with your tax dollar.

  35. Porter,
    Subprime mortgages were never more than 16% of the market and nearly 80% of those loans are still performing today which means the market failed when only a small fraction of total borrowers did. This means the collapse was caused not by those who failed to pay their mortgages but buy greedy, way over-leveraged banks. I share your disdain for deadbeats but just want to help you focus where it belongs.

  36. One of the things not addressed at all in the comments or the article is why to have home ownership. The idea of short term renting while one gets financially solid and gets a good down payment for a house makes sense.

    Long term renting has the disadvantage of housing expenses linked with inflation. Long term home ownership (and I mean paying off the mortgage) is one of the biggest reasons why some people can have a secure and comfortable retirement.

  37. Here comes the next housing bubble..All that cheap taxpayer money must be itching in the pockets of the banks. It looks like revolving door therapy to me.

  38. There are many areas of the nation where the "bubble" is already swelling. You can tell just from talking to realtors or looking online at ads.

    It's not everywhere of course -- the Rustbelt Midwest is still pretty hard hit -- but in "desirable" areas, prices are rising quickly.

    We had dreamed of retiring to Florida; the bust in housing prices made it seem possible, even up to last year. But today, home prices even in the cheapest parts of Florida are now 50% higher than last year, and rising rapidly. In 18 months, they will be back at pre-meltdown prices. Investors have bought up ALL the inventory of foreclosed homes, for cash (meaning ordinary people cannot hope to take advantage of those low prices) and done quickie renovations, and put the homes back on the market for DOUBLE the foreclosed price -- double!

    I mention Florida, because it is the epicenter of "boom/bust cycles" and often where things like bubbles can first be seen.

  39. Great Recession, check. Divorce, check. Not walking away from my home and still paying the mortgage, blank. Trying to refinance, blank.

    How does this issue get addressed?

  40. I don't get it. Why is there an entitlement to "not walk away" from a house even if you can't pay the mortgage?

  41. Because it's something like a business decision and businesses make these decisions all the time.

    Why the double standard for homeowners?

    Would you like to go back to the days of debtor prison? Bankruptcy protection laws were designed for a good reason, with the "small people" in mind.

  42. People who have been through foreclosure or short sale or bankruptcy should have to take a personal financial literacy class before qualifying for their next large loan be it a car or a house or education loan. I have never purchased a home without at least 20% down and never for a mortgage that was more than 25% of my family take home. I bought my first home at 36 and it was less than 2,000 sq feet. It had 3 bedrooms. But that was what I could afford.
    I drove a honda and saved for college and paid for a whole lot of day care and camp for my kids. Now I am piling it away for college.

    I wish Tammy and Mike a lot of luck.. Big house, pets, kids....looks like they gambling and stretching themselves thin again

  43. I don't know about other states but in NJ in order to file for bankruptcy you must go through a "financial training" type class.

  44. I think you may be being too judgemental and don't know all of what can go wrong and all of what goes into such a decision.

    Some people arrive at this place after doing all that you say.

    Furthermore, in bankruptcy, one is usually required to take a financial literacy course.

  45. I'd feel a lot better if all of the wreckage from the housing collapse affected only foolish people who overextended and bought more than they could afford. Those people who did provided the tipping point that accelerated the crash.

    But that tipping point carried many, many people who did just exactly as you'd recommend, and put down 20%, kept the payment in line with income, and bought modestly, directly into disaster, even though they had acted with they thought was prudence. All it took was for the financial cascade to leave one of them unemployed and needing to sell the home and the 20% down was not nearly enough equity to protect them from being underwater when prices fell 40%.

    Yes, personal finance might help the foolish and the spendthrifts, but only strong protections in the market to reduce wild risk taking and wild volatility will protect the people who are wise enough, but unlucky.

  46. Where I live nothing is selling as no one can sell their existing home without taking a huge hit. How can people simply walk away from their obligations like that? I could not sleep at night. Guess people are different, huh?

  47. It's when you can't sleep the other way (clinging to a property that is going to take you down inevitably), that you realize that you need to come to terms with reality.

  48. Because they know they can get away with it. Because they know their credit won't take a serious hit -- not really -- and they can buy again quickly.

    Because they can live FOR FREE for several years, pocketing the mortgage payment and building up a nice savings account (OR living high on the hog on all that extra moola).

    It's so easy to get away with, that it has tempted many otherwise honest people into grifting -- because they can do so much better than the honest chumps who pay their bills.

  49. I am one of those that still have the house I bought years ago and am paying my monthly payments. But financially and legally speaking, if I had a house that was bought at the peak of the market and was underwater, I would have walked away. The contract one signs explains clearly what the rules are, on both sides, and if you default, the mortgage holder keeps the house. The penalty for you could include living in a state where you are still responsible for the shortfall or not; bad credit for several years. I work with contracts and a business wouldn't think twice about doing this. If you look at your family finances as a business why would you pay more money than a house is worth?-it just doesn't make sense. Also, not everyone was able to stay in their home during the foreclosure-but some were. Again, they weren't breaking a law or a contract.

  50. if you get foreclosed on you should not be able to ever buy a house again.

  51. Telll that to Donald Trump.

  52. Have you ever had a problem in your life such as a job loss or a major illness? People like you who have no sympathy for others should suffer similar consequences for their lack of compassion. No new job or doctor for you. Too bad.

  53. Why? That makes no sense.

  54. The three C's of credit when making a loan: capital, capacity and CHARACTER. Clearly, the third criteria is severely lacking...

  55. We need to rethink our understanding of home "ownership." When you have a mortgage, you don't own a home, you're renting from a bank.

  56. Right, and even after you satisfy the mortgage just try and stop paying property taxes on it and see who 'owns' it then! In the end we're all renters...

  57. Not at all. For starters, you've LOCKED IN the cost for 30 years -- try that with an apartment (unless you lucked into a rent controlled place, with 1940s prices).

    And 30 years goes by. Some people only have a 15 year loan! And sometimes you can accelerate your payments, and pay it off faster. In any event, I am shortly going to have my mortgage paid off, and then I will NOT be renting anything from the bank or anyone else.

    @Snookman: everybody pays taxes. If you rent, the taxes are built into the rent, and part of the reason that the rent goes up every year. Unless you don't want police, firemen, street repairs or lighting, you have to pay taxes.

  58. Wish to congratulate you on your soon to be paid-in-full mortgage ! My sturdy, small home by Trenholm standards, with a quarter acre yard for food forestry and vegetable gardening is paid in full. And believe me, taxes paid for services needed are a relative and welcomed breeze after one has paid off their conventional mortgage. I am happy for you.

  59. Hot off the press is the Monday announcement by the head of the FHFA that Freddie & Fannie will back loans with as little as 3% down payment. It's deja vu all over again.

  60. Catherine it never about the monies down because a billionaire still looks at you as a risk with 20% or zero down! You have a percentage on your head because the fact is that at the moment of closing the loan you did not have 100% of the monies to buy!

    You and most 99% of the market needed to borrow money because the fact is you could not save that amount and Fannie came along and got investment dollars to create a program that required 20% down so that more people could buy. At some point as when they created the 20% standard they wanted more people to buy so they waived the 20% and allowed 5%.

    As long as you set realistic payments the 20% is only for the lender to have less risk if the loan goes bad, the VA loan program show for a fact that people that put zero down and not defaulting, as it base on a debt ratio.

    If your wanting to blame someone it the investor that set the program up and our providing the product. But let look at the real effect the crash has cause on great credit people: The were first able to buy all the foreign car (65%) with cash for clunker and appliances, and receive 4% and under for 30yr mortgage rates, and the Stock Market was over 17,000 causing those that loss to regain and profit from the Fed pumping $4 trillion into the Market plus bailout the banks with $16 trillion in loan at zero to .5%!

    These crisis has been a winner for all good credit buyers, so stop with the fake concern!

  61. Charles .... if one or more investors should choose to use their money to lend to borrowers who provide 3% down, I have no problem with that.
    If taxpayers are put on the hook if mortgages go underwater, I've got a problem with that. Re. concern: well, let's not forget the many Americans who have lost their homes because of easy credit. Should they have realized how precarious their financial situation was? Maybe, but the lure of easy credit seems to be addictive. Do you think people will make smarter decisions this go round?

  62. Catherine I am sure you financed your loan through Fannie or Freddie that were always backed by the Fed Gov. Now as far as precarious resulting in 20 million US citizens losing their jobs, was not seen by the Fed and all the experts so at what point would you have expected the 20 million non economist to have seen the tsunami coming.

    The Federal Government started the low down payment stuff in 1934 with the FHA program, as home loan lenders were not making loans to many people and is why FDR created the program. Now when these less than stellar folks were provided an opportunity to move out the ghettos and build the suburbs, the FHA was consider great!

    Fannie & Freddie own 56% of all the mortgage loans in America so it to late now to stay you don't want to be the backer of low down payment easy credit loan when in fact most all loan were originated with closer to 5% down and not 20%!

    Here what is a fact and that is you must have a healthy housing market to keep producing as it is a big part of our economy and without borrowers to by the step up homes current homeowner cannot purchase and there no more construction sector.

    What we have are people talking about when I walked to school 10 miles one way to school, however that was then and this is now, and those parent might be put in jail for neglect when the child is abducted because the times have changed.

    Now if we want the right thing to happen everybody should pay cash and have no debt Property values would be low

  63. NYTimes articles dealing with financial issues always seem to focus on individuals who are way outside of the median. The first couple, Tracy S and her husband, went through a divorce. Divorce is generally very bad for one's personal finance. The bank took a write down of $25,000; which is a relatively small amount compared to the 50% losses some people face. I suspect if Tracy S hadn't gone through a divorce, she and her husband would have continued to pay their mortgage and would be fine. Said another, I could easily find someone today who is going through a divorce and had to sell their home for a loss.

    The second couple were outright speculators and fairly poor ones at that. They were overleveraged, executed the construciton of their second home poorly, and paid the price. Not exactly the typical case either.

    Perhaps I am the most typical case, obtained a 30-year fixed rate mortgage in 2005 and have paid it continually. Maybe my home is worth less then I owe, I don't know, I haven't tried to sell it. The majority of Americans continued to pay their mortgages throughout the financial crisis. There were, however, lots of folks who did everything right and still lost their homes (due to job loss). This article doesn't discuss anyone who did everything right but still lost their homes.

  64. I agree. I have never stopped paying on my mortgage, though my home has lost over 70% of its value in 2006 -- and my property taxes have not gone down a nickel (the county refuses to reappraise and denies the foreclosure crisis even exists).

    But I know of dozens of people who have "gamed the system" -- sometimes to shuck off a house that they overpaid for (or just didn't like much) in favor of living for free for several years -- pocketing all that cash -- then buying another, nicer house for less money and a much lower mortgage rate.

    Nobody even cares about bankruptcy and foreclosure anymore; they are not things people are ashamed of.

  65. Yes you should purchase a home to live in it and have the benefits of controlling your area (also the costs). Not to make money or whine that you can't sell it for what you paid for it.

  66. 5.5%. Come on. What is this, a slow news day?

  67. At what point will we learn? It seems never. The Big banks will not be happy until they have every last single penny and the rest of us have to turn over our savings to them in the coming bail ins. What does it take for a populace to learn? If we allow bankers to continually make gambles with the monetary system and that is what they are doing- this next crash's ramifications will last a generation or two. The market soars on earnings that reflect stock buy backs, mergers, and the hope the Federal Reserve keeps the punch bowl full. There is no organic growth. Full time employment with benefits is elusive and retail store fronts continue to close. Next time you drive through your community check out the strip malls and business centers- keep a mental note regarding the number of for lease signs. Ask your doctors and dentists- if you can afford to see them- what their practice is like. Ask how many people they have lost and how many more Medicaid patients they are seeing. It is the job of the Federal Reserve and the banks to make solid loans. Loans that are going to be paid back. The housing market should not be seen as a way to garner votes. I waste my time here. No one has the guts to see things the way they are. Reality is too ugly to look at- bread and circuses are all the rage.

  68. An article just today in my local newspaper tells of the numerous failures of restaurants and small businesses in our city. In one depressing case, the owner burned down his own restaurant for the insurance money. Crime is way up, too -- another local restauranteur was shot to death by his own employee, as the employee was robbing the till.

    The city has boldly stepped forward to....decide to pay for some new landscaping and signs. Yes, that will definitely address the problems of crime, lack of customers, slow business, unemployment, foreclosures (still quite bad here).

    That's just my little suburban newspaper. But the cheerleading no different and just bigger here at the NYT: everything is great! Obama is a hero! unemployment is down! job numbers are great!

    Meanwhile, back in reality -- real human beings know that things are terrible. And we've learned nothing from the Great Recession and the banking crisis -- NOTHING....nothing.

    If anything, people are eager and enthused to usher in the new Housing Bubble. Prices in many areas are up 50% or more over just 18 months ago. You can almost smell the frenzy starting.

  69. Concerned Citizen,
    It would be helpful to know where "Anywheresville" is. I am also doubtful that so many people with modest incomes should be buying houses. Perhaps we should discourage people from buying their own homes. Real estate speculation has played a big role in our financial downturns. But discouraging that will require a major change in our society. We've been told for generations that owning your own home is the way to go.

    I haven't heard many people call Obama a "hero." Most of them are just saying he's doing the best he can with the challenges he faces. I think he is.

  70. Having some personal experience with the housing bust, albeit in Denver in the mid 1980's when energy, farming and banking all collapsed, I have more empathy than many of these reviewers. If someone can pull themselves financially back together after 3 - 5 years, and place a reasonable down payment such that have "skin in the game", I see no reason to penalize these former homeowners who were hurt by the excessive speculation of mortgage bankers. Live and let live, people!

  71. These people were hurt by their own speculation.

    Franky if you can't afford your house in a downturn you really couldn't afford it in good times. When I bought one I could easily have been approved for a loan on the 10-roof Victorian with turret that I really wanted. Instead, bought the 1940s bungalow -- cute, desirable old-fashioned neighborhood, safe, lots of amenities -- and if all else failed I could make the monthly payment working at min wage.

    In fact I quit a very well-paid job in Sept 2008 ... and despite taking it easy for a couple of years at the depths of the recession, with sporadic freelance income, paid off the house a couple of decades ahead of the mortgage terms. Was never late on a single payment and certainly didn't have to stiff any creditors.

    But I guess some people would rather live in a big house even if they have to be thieves to do so.

  72. For gods sake -- they "saved" that money not from thrift or industry, but by living FOR FREE in a foreclosed home for 2-3 years....no mortgage payment, no taxes, no escrow, no PMI.

    It's pretty easy to save up a 5-10% down payment, when you are living SCOT-FREE off the banks and taxpayers.

  73. Gotta love the culture of lack of financial responsibility. Someone pays when a house is short-sold or foreclosed on, but not the home buyers obviously.

  74. Usually the bank pays, and they're the party who took on the risk, so what's the problem?

  75. A large percentage of the foreclosed on loans were securitized and sold on to investors. The original lenders didn't retain the risk they took on so they didn't have to absorb the loss when the house was short sold or foreclosed. The investors -- and the taxpayers who bailed out the investors -- wound up losing.

  76. The problem is the government insisting on banks loaning, and of course the bail outs eventually.

  77. Fannie Mae is back to lending money to risky borrowers with only 5% down. It seems we have learned nothing.

  78. Just great, all the short sellers are returning just as Obama is forcing lenders to make mortgages easier for these low-income buyers. Sounds like another recipe for disaster.

  79. Doesn't just "sounds like", but "IS" a recipe for disaster!

  80. One factor not considered here, which I have seen firsthand with friends and colleagues who went through foreclosures between 2008 and 2013:

    It took so LONG for banks to actually foreclosure, when they had so much inventory on hand (something which is quite gone today), that the homeowner could stay in their foreclosed house for up to three years.

    In that time, they were basically living in the same house, same neighborhood -- but paying nothing. Living for free is quite a bonus! and part of that bonus is you get to save from $800-$2000 or more each month. That's quite a nice windfall.

    The folks I know personally were able to handily save up a new downpayment on a future home this way -- far more easily than someone who lived within their means and paid their bills. They were also able to have fun, go on vacations, buy big screen HDTVs with that big wad of extra cash each month.

    More people than you realize played this game -- played it on purpose -- with no real hardship (or a made-up one). Meanwhile, those of us who have to live with their rundown foreclosed house next door, or a bulldozed lot, or a Section 8 family raising havoc in our once nice neighborhood -- WE are paying the price. And WE get nothing in return, except our savings accounts now pay 0.1% so that the banks can be bailed out for the many foreclosed "cheaters".

  81. The lesson here is that it does not pay to live by the rules.

  82. You are 100% correct. My sister and her husband both work and make well over 6 figures between them are doing this and it is quite tempting.

    Their mortgage is 2500 a month. They figure it will take anywhere from 2-3 years to finally get to the point where all their options (applying for mods, delaying court dates, etc)

    So, let's say 3 years. That's 36 mortgage payments x 2500 a month equals a 90k cash stash. They are planning to walk away, rent for a few years and then downsize and buy a smaller place.

    I'm thinking of doing exactly the same thing.

  83. Maintain your dignity and do what you know is right. If you trade that for $$ then what?

    :(

  84. People want and need stability and home ownership provides levels greater then renting. No surprise people are testing the waters again.

    Here is the rub. If you NEED a 30 year mortgage with 5% or less (down payment) and you are not under 30 (first time buyer) ...... you can't afford the house. The 30 year bleeds wealth.

    Sorry! The first couple got lucky -- they got divorced at a time when banks were writing down and the IRS was giving tax breaks. The second couple were investors ... and bad ones.

    We are never going to be able to protect people from themselves -- and their bad choices!!

  85. We can "protect" a lot of them--agreed, not all of them--and--more importantly-- ourselves, with hard and fast 20% down requirements. Bring back "old fogey" banking! LOL

  86. The real estate industry is corporate welfare at its worst. Taxpayers subsidize mortgages, bail out banks that make bad ones, and then tax the bank shareholders at 15%. Please stop. Thank you.

  87. You lost me at tax the bank shareholders at 15%. Where are you pulling this number from, out of your butt?

  88. Basis which are tarnished by bad loans are still in business. TARP did not force these banks to be sidelined for years.

  89. Hard to understand why people who went through this are going back in for another round. Asset inflation (equities and homes) has propped up the housing market. Homes are too expensive for where wages are at. better for people to use 401k tax deferred contributions to build their wealth rather than trying to build equity on a 30 year fixed IMHO. Millennials aren't buying homes, americas way of life is changing. More people choosing to live in apartments in urban areas, seems like another housing bubble bust is on its way.

  90. EXACTLY !

    I'm looking for apt in Brooklyn and there are those that tell me, "You'd be a FOOL to not buy in that area" (Prospect Park) - but nope. I'm going for a rent stabilized apartment and will invest my $$.

    First of all - I don't understand the idea of one's primary residence being thought of as an investment period. In order to receive the benefit of a property's increase in value - one has to SELL IT or reverse mortgage - both terrible ideas. But in the meanwhile property taxes just go up. - In NYC at least, rent STABILIZED is the absolute way to go.

    I want a place to LIVE in. I'll invest in the market.

  91. This bias in this article is obvious. It assumes all readers think more homebuyers is a good thing. Only the one percent think this, because they have investments in the financial institutions doing the lending. The rest of us know this is just setting us up for a future disaster. Why doesn't The New York Times know this, or more likely, this is just another example of how it is a newspaper for the one percent. Most of the people who went into foreclosure or had to do short sales had bad judgment and they haven't changed. It is the rest of us, the responsible people in the 99 percent, who pay for the exploitation of the financial institutions and the bad judgment of a minority.

  92. I bet most of the 1% don't think that poor people should purchase houses. Renting is great and folks with assets can invest in REITS to provide the rentals.

  93. Yes, kids. The greedy banks are back to their old tricks and the stupid borrowers who haven't learned to live withing their means are lining up for a new round of loans they'll default on.

    Add to this the surge in car sales driven by our supposedly rebounding economy. What nobody will tell you is that the poor people who are buying their first new car in 10 years are taking out 7, 8 and 9 year loans.

    Add all of this up and we're looking at an unavoidable repeat of history. Look for another crash in early 2015.

  94. No the stupid government is allowing this, some smart banks are saying no thanks. Bundling mortgages without sending the risk with them is the problem. If you can't insure the risk and it comes to you either you are careful or out of business soon. Many won't get loans, let them rent.

  95. I just saw the "list price" at a local VW dealership for a new VW Tuareg, $57,000" ". For a friggin' Volkswagen! No wonder you wind up with mortgage-like 7,8, or 9 year loans, if you're crazy enough to buy it, and it 's not at least partially a business write-off!

  96. I always laugh when I see young people in these high priced VW.......I remember when I was driving around in a VW Rabbit, my dad bought me one for $3200 almost new in 1978. Some of the interior was made of hard cardboard. Crazy that people think it is a luxury auto maker.....

  97. "Bank of America, Wells Fargo and JPMorgan Chase all said they had decided not to participate in the Federal Housing Administration’s Back to Work program...."

    So the two best-managed banks, plus one wannabe, don't want anything to do with these borrowers? That should tell you something. Which banks are making these loans?

  98. Bank of America "best managed"??? madone.

  99. No it is the other one.

  100. As a would-be first time buyer who has spent YEARS paying off medical debt, people like this enrage me. I don't think anyone who has had a bankruptcy on their record should be able to purchase a home for a certain number of years (say 7 to 10) following that. On the other hand, I now don't feel so bad about the second hand furnishings in my apartment as compared to the sleek, expensive looking furniture in the photographs. Because I meet my credit obligations, and live within my means, unlike those featured who pass along the costs of their charged off debts to other consumers (in the form of higher intereste rates, etc.)

  101. I wish the writer Tara would include in the article the occupation of the couple, Tammy & Mike.

    They are real estate agents with Redfin in the North Atlanta area.

    You would think that these people if they jump back into home ownership so quickly after their experience with foreclosure and bankruptcy would be more conservative financially and pick a smaller home this time around!

    Very troubling sign of another housing bubble.

  102. I did include their occupations in a prior draft, though it was probably edited out because of space constraints. In our interview, Ms. Trenholm explained that her drop in income as a real estate agent, which coincided with their housing troubles, also hurt their financial position.

  103. Wow, why was that tidbit of info omitted from the story?

    a) they should know better

    b) the writer went the easy route to find her "real people" by going to industry insiders and then failing to mention that they were, instead of finding actual consumers without professional experience in the real estate market

  104. I was a real estate salesperson in the Phoenix metro area during the years leading up to the big bubble bursting & a bit beyond. One of the reasons I left the business was my frustration with buyers who fell wholeheartedly for the insane amounts & loan conditions they were being offered by lenders. No doc, no money down ARMs with balloon payments for 4 bedroom, 3 bath tract homes listed at 500K or higher, when their incomes & savings just didn't support that kind of investment. When I advised them to look at home prices supported by a 20 year fixed rate conventional mortgage with 20% down as the range they should purchase within (regardless of the loan type they eventually decided upon) most of them would look at me like I was completely nuts. My broker called me a "deal killer" among other things & told me I wasn't cut out for the business. I agreed. Fast forward to the present: I still have my home, she doesn't.
    Homeownership can be quite rewarding but it's not for everyone. I like owning my own home but would never consider using it as a bank. It's small & solidly built for the extreme desert temps where I live. Still, maintaining it requires constant work. My advice for the average residential owner-occupied buyer in today's market, now that we all know what can happen, is to get pre-qualified for a 15 or 20 year fixed conventional mortgage at 20% down. That will tell you the price range you should be considering. Just saying.

  105. Just making sense!!

  106. Brava for getting out, Jayne!

    I was a licensed real estate person for a while in NYC and quickly found that my 'peers' were all 100% liars, con-artists, and sometimes downright criminals. I was like, who cares how much money they make? - They've lost their souls.

    You have good advise and I understand the importance of allowing for mortgages with solid lending practices - but the thing is that people in this country need to understand - if you have a mortgage - please don't use the term "home-owner." "Rent-to-own" payment plan is more like it.

    I'm not angry at the people featured in the article specifically, but "I hear ya" with regard to all these commentators' and your frustrations with people wanting to live in palaces they can't afford. It is a very bizarre and sad fact of American life today that average people with average means expect that they should live like royalty.

    What happened to our society that so many of us imagine that we should live so high and be in such debt. ?? DEBT IS GROSS !!

  107. Some should never be allowed to have a mortgage if they can't come up with 20% down. Renting is great and saves money on many things that a home owner has to do. Foolish to allow 100% lending, 3% down, etc. Just making a future mess again. We never learn that you have to earn what you get, not just get what you think you deserve. I think I deserve many expensive things that i can't afford so I do without them.

  108. I am one of the "former borrowers" who is presently spooked and wary of purchasing a home. I moved to South Florida and purchased not far from the peak of the boom. I went through a short sale due to a combination of circumstances after the fixer upper property I purchased through a conventional mortgage with 10% down slipped into an abyss of about $100,000 of negative equity when the market soured in 2008. I was not a speculator or investor, just a rather naive 30 year old at the time, whose life savings disappeared into the void. Four years after my short sale, I no doubt could qualify to buy again, but am proceeding with caution. Being a renter is frustrating, when I was used to making sure problems are fixed to my standards, and I enjoy painting and customizing a home. However, I will wait at least 6 more months before revisiting the issue. Fortunately, my new locale offers many properties I could purchase on a 15 year mortgage with at least 15 percent (hopefully 20 percent down). This time, I want to be sure that I own the home, and it does not own me.

  109. Can you elaborate on how your savings slipped into the void? Because the implication is that some mysterious external force caused that to happen.

    Didn't your mortgage payment remain the same, regardless of volatility in the market value of your property? What prevented you from simply continuing to make the agreed-upon payment, living there and waiting for the market to rebound?

  110. That is called strategic default. Not only she indeed got her down payment back by not paying mortgage for a few years when the short sale was going on, she will do it again when the similar situation (of price depreciation) happens again. She has nothing to loose, leaving everyone else paying her tab. It's her success story.

  111. So Fannie and Freddie are back to their old tricks allowing mortgages with little or no equity. Next time F&F won't get bailed out.

  112. It's political. The Obama Administration couldn't wait to get rid of the individual (Edward DeMarco) serving as regulator of F & F because they felt he was "too tight" on F & F's credit extensions, and not willing to agree to gigantic mortgage write downs! "Reap what you sew."

  113. I was enraged by this article. This YOUNG couple buys a $500,000 house, buys additional property for speculation, ends up on the losing end of the gamble, declares bankruptcy and now is back living in another fancy home?!?!?!? Are we supposed to feel sorry for this couple since they had to go through foreclosure and "downsize?" Look at the pictures of their new home! My husband and I work hard, make smart financial decisions to plan for the future, and live in a modest house. Sometimes I think we're doing everything wrong, since my house and furnishings don't look like anything like what's in these pictures. AARRRGHHH!

  114. Walk away from your mortgage. File Bancruptcy. Stiff the American taxpayer. Wait two years, and get another mortgage. Nice deal. Anyone who will walk away from a mortgage once, will do it again. When will common sense lending return?

  115. Several have commented that the couple does not need a five-bedroom home. Maybe they don't need five bedrooms, but some of those rooms can be used for other things. My home has six rooms that can be used as bedrooms, and four full or 3/4 bathrooms, but one of the bedrooms is used as a home office by someone who has to conduct meetings remotely at odd hours, and another is used mostly as an exercise room, because we don't want our exercise equipment in our dining room or our den. The exercise room doubles as a guest room for people who cannot climb stairs, since it is nicely fitted out as that, as well, with the treadmill folded up, and is adjacent to a full bath. Sometimes my spouse or I sleep down there, for various reasons. Two of the upstairs bedrooms are used as guest rooms, but are also used for drying clothing on racks and for ironing and sewing when we don't have guests. The three occupants of the house use only the other two bedrooms for sleeping, so it may look as though we have too many rooms, but we have a large extended family and sometimes run out of guest rooms. We anticipate also that at least one older relative (and perhaps an additional caregiver) may have to live with us at some point. Knowing that we have actual suite-like spaces to accommodate those persons is nice. The point is that someone looking judgmentally at another's domestic arrangements may not realize that there is an actual rationale for such, although, frankly, that is none of their business.

  116. It doesn't matter what you use the space for, you still are opting to heat, cool, motgage and light a lot of square footage. We all would enjoy a sewing room, home gym and lots of beds for visitors but some opt to place a lighter and more frugal footprint on the planet.

  117. The issue is very simple: people want to own a house when they do not have the means to afford it. I cannot understand how the market allows prospective buyers to purchase with 10%, 3% or even worse, no down payment, though the latter is not an option anymore. If it were that easy to own a home everyone would own one, all you would need is a pulse and a job to prove you have money coming in every month.

  118. I'm disgusted by the people who over extend themselves and speculate that they can make ends meet and end up with forcing the bank to eat the loss on a short sale or foreclosure of property...then they have the gall to expect to able to borrow again within two years after stiffing everybody. Divorce too, is not an excuse for financial irresponsibility. The couple went into debt together and have an obligation to not to make others pay for their misfortune planned or otherwise. As a retired senior who has gone through the mill getting a mortgage for a new home despite a 35% deposit and even enough money in the bank to pay cash for the home, I am treated as a risk by mortgage lenders even though my cash flow easily handles my mortgages. The reason I'm a risk is because others have burned the banks and mortgage underwriting requirements are now beyond belief. Ask Ben Bernanke. Even with several million in cash and liquid assets everything came under strict scrutiny. That's just nuts. I got my mortgage after terribly rigorous review. It's less than 15% of net monthly income. But, next time I'll just write the check. The bad actors who defaulted on mortgages and then declared bankruptcy hurt not just themselves but everyone else too. Let these former defaulters and dead beats wait for mortgages up to 5 years and let them pay higher rates and undergo even stricter scrutiny. But don't penalize the good guys who pay their bills and meet their financial obligations.

  119. Read the other article about people not putting money in their 401k's, and it paints a sorry picture.

    Expect, in a few years, for this couple to get in over their heads again, go bankrupt again, having no savings, again. We'll bail them out, and pay the price in terms of low savings yield and higher mortgage rates.

    Fast forward to their retirement. They show up with their pockets turned inside out, crying about how they have no savings, and "need" help. We'll pay for them through means-testing on Social Security, increased taxes on 401k/IRA withdrawals, etc.

    There are the people who do the right thing. And then there are the loathsome people featured here: take from everyone else, so they can live comfortably.

  120. Just remember that the chances are that the mortgage on Tammy and Mike's Charleston home was government backed by Fannie Mae, Freddie Mac, FHA or some other gov't program. This means that you, the taxpayer, paid for their financial mismanagement in 2008-2009. Now they have another federally subsidized mortgage from the FHA.

    The old rule was that no lender would lend you a cent until 7 years after your bankruptcy.. Tammy and Mike filed for bankruptcy because of bad financial planning, not a divorce or high medical bills (the principal reason for consumer bankruptcies).

    I can see the rationale for lending when the borrower suffered a financial setback due to causes beyond their control, but Tammy and Mike don't have this excuse.

    We don't seem to learn from our mistakes. Next we will see the return of liar loans, no doc loans and negative amortization loans.

  121. Their loan isn't through FHA, it's through the Department of Veterans Affairs, which is a big problem with this article. Those loans are a very particular niche of the market and are well-serviced by the VA, particularly for homeowners who find themselves in financial trouble or even those headed for foreclosure, which is a very small percentage of VA mortgagors as these loans have very low foreclosure rates across-the-board. And even for the ones who do enter foreclosure, they are able to recover relatively quickly and qualify for another VA loan as compared to conventional loans.

  122. Fast Forward 13 months later...Guess who's flipping their own house for $425,000...give up?